Colt Defense, the 179 year old creator of the legendary "gun that won the West", announced Monday that it filed for bankruptcy due to weak popular sales and government orders.

Colt, which makes recreational guns as well as the M4 and M16 military rifles, said it initiated the voluntary chapter 11 filing after creditors rejected an appeal to restructure its debt.

However, it said creditors agreed to provide $20 million in emergency funding that will permit it to keep operations running.

"While entering Chapter 11 protection in the absence of a consensual agreement with our noteholders was not our preference and we do not take it lightly, we are confident it is the best path going forward," said Keith Maib, chief restructuring officer at Colt.

Maib said Colt said the plan would enable it to "gain traction on a challenging but achievable turnaround in our business performance and competitive positioning."

Under the plan, Colt plans an "accelerated sale" of its business operations to the investment fund Sciens Capital Management, the main shareholder of Colt Defense. It expects the bankruptcy process to be complete within 60-90 days.

Colt, which dates back to 1836, when inventor Samuel Colt revolutionized the firearms world by creating the first revolver, warned in bondholders in April  of "increasing liquidity challenges as a result of several recent business trends."

These trends included a drop in demand for Colt handguns and delays in the timing of US government sales, including foreign military sales through the US government.